The Following Income Statement Is Provided for Vargas, Inc What Is This Company's Magnitude of Operating Leverage?
A) 3

question 12

Multiple Choice

The following income statement is provided for Vargas, Inc. $\begin{array} { l l } \text {Sales revenue ( 2,500 units \( \mathrm{x} \$ 60 \) per unit) } &\$150,000\\ \text {Cost of goods sold (varable; 2,500 units \( \mathrm{x} \$ 20 \) per unit) } &50,000\\ \text { Cost of goods sold (fixed) } &8,000\\ \text { Gross margin} &92,0000\\ \text { Administrative salaries} &42,000\\ \text {Depreciation } &10,000\\ \text {Supplies (2,500 units x \$4 per unit) } &10,000\\ \text { Net income} &\$30,000\\\end{array}$
What is this company's magnitude of operating leverage?

• A) 3.07
• B) 0.33
• C) 3.00
• D) 1.67

Identify and calculate goodwill in business combinations.

Apply the equity method of accounting for investments in associates and joint ventures.

Understand the impact of treasury stock transactions on earnings per share and owners' equity.

Comprehend the classification and accounting treatment of mandatorily redeemable preferred stock under current GAAP.

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Definitions:

Department Store

A large retail store offering a wide variety of goods organized into departments.

Practical Implications

Real-world consequences or applications of theories, actions, or decisions in a specific field or situation.

Value-Added Worker

An employee whose work activities add worth to the product or service, thereby contributing to the organization's success.

Upside-Down Pyramid

A management concept where the traditional hierarchy is reversed to empower lower-level employees and enhance communication and decision-making.